Condominiums need two separate insurance policies. One is the master policy for the association which covers all the common areas such as walkways, stairs, elevators and tennis courts. The other is the unit owner's policy which provides protection for personal property. Both policies provide liability coverage for anyone filing a claim or lawsuit based upon negligence. The two policies interlock so no gap in coverage occurs for the association or individual owner.
A person can only insure what he owns. For condominiums, it is vital to know exactly what an individual owns when he purchases a unit. The basic answer is interior space and sometimes interior walls. The exterior walls of a condominium along with the land underneath a unit belong to the association. Each unit owner owns an undivided interest in the association so in a way the unit owner has an interest, but not an insurable interest, in every exterior wall including his own. The association owns everything the individual unit owners do not.
Association insurance coverage includes damage to the grounds and buildings from standard perils such as fire and wind. It also covers vandalism to landscaping. The policy protects against theft by the persons who handle the association fees and pay the bills. Other examples of coverage include equipment breakdown, debris cleanup following storms, damage from storm and sewer backup and costs to clean up pollutants.
Unit Owner Coverage
Unit owner coverage provides standard coverage for personal property. It also pays for additional living expenses if damages to the unit make it unsafe. For example, a storm or fire results in the owner being unable to live in the unit until it is repaired. Insurance pays for a hotel, meals and laundry expenses. It also covers any additions or changes to the unit, such as a new carpet. Finally, if the association bills the owner for additional costs, such as storm damage not covered by insurance, then the owner can be reimbursed from his own policy.
An individual slips and falls on the steps leading up to an individual unit. The steps belong to the association although as a practical matter the only people who use the steps are the unit owner, his family and guests. Both insurance policies provide liability coverage. The injured party, most likely through an attorney, will pursue a claim against both policies. Each insurance company will accept liability for the claim and make payment if appropriate. If payment is made, the insurance companies will attempt to sort out the facts to determine whose negligence resulted in the injury.
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